Investment highlights:

Due to the current fierce competition for low-pressure products in the market, which has led to a decline in gross margin and a sharp decline in deferred earnings confirmed by government subsidies, the company's performance in the first half of the year declined slightly year-on-year.

The DC3.7V8.5AH polyimide (PI) diaphragm nickel-cobalt-manganese lithium-ion monomer battery sent by the company. The polyimide (PI) diaphragm increased 4C cycles to 750%, more than 7,500 times, and kept the capacity above 70%. We believe that batteries with high energy density and high power density are one direction humans are searching for. It is inevitable that this type of diaphragm will cause fundamental changes in the battery industry, but whether it can be industrialized is still uncertain. In the future, it will be widely used in power batteries and energy storage power plants.

There is still no obvious change in the use of polyimide fiber mainly as filter material. The main reason is that we have previously analyzed, such as weak environmental protection policies and poor profitability in the application industry. We can only expect an increase in environmental protection policies in this area.

In terms of polyimide usage, since the characteristics of this material itself are flame retardant, warm, do not absorb moisture, and have native far-infrared functions (this function has been verified by relevant agencies and issued test certificates), we believe that it is still widely used in civilian clothing, including health products (such as knee pads, socks, etc.), outdoor equipment (jacket underwear, etc.), household goods (blankets on the bed, mainly warming+flame retardant, which is in demand in high-end hotels and high-rise users), etc. We are most optimistic about the widespread application of health products. One is because the price market is acceptable; two is because most regions of our country are cold and humid in winter; and third, because our country's aging is getting worse year by year. Using far infrared to improve microcirculation will be a blessing for the elderly.

As for the company's opinion, we still feel that it is difficult to see performance in the short term. Following up on the company's projects, as long as there is a trend change, it is the best opportunity to buy. It is estimated that the 2013 EPS will be around 0.08 yuan, which is overvalued, but we think the application of polyimide consumption may be rapid, and we will temporarily give it an “increase in strength” rating.